Archive for September 2011

Last week BT said it would lease up to £15,000 worth of technology and telecommunications to businesses in the North-East, Yorkshire and Humberside that had been trading for less than three years. A typical £3,000 lease would cost less than £20 a week, it said.

That sounds like a good deal for start-ups, but one wonders whether BT shareholders would be so keen on the deal.

If one takes the £3000 on offer over three years and pays back £80 a month for 36 months, the start-up ends up paying a total of £2880, which is a -2.63% interest rate.

Moreover, BT will presumably have factored in the mortality rates of start-ups in the area. The latest ONS figures, for 2004-2008, show that one-third will die within three years, and more than half within five. Figures post the banking crash are likely to be much worse.

Since banks won’t give start-ups ice in winter, let alone a loan, and there is no way BT can make a profit from this, this seems an overly generous offer. So why is it doing it, and why is it not available to start-ups in the rest of the country?

Is this something for the Office of Fair Trading or perhaps the Compeition Commision to consider?

Some people have been shocked by the ITU’s publication of figures showing that the UK ranks fourth in the world for access to high speed broadband, with most Brits have access to broadband speed of 10Mbps or more (see table).

Source ITU. What you see is not what you get in the broadband world. (Click to enlarge)

In fact the document notes that a recent study by the regulator Ofcom showed that actual speed were about half those advertised, especially for those with ADSL access. “FCC (US Federal Communications Commission) has come to the same conclusion in the United States,” the ITU notes.

The ITU stats department said data on fixed (wired) broadband subscriptions are collected according to advertised speeds. Ofcom was the source of the UK data.

“These may very well differ from actual speeds,” the ITU said.

Which is an admission that the figures may not be very helpful to anyone, including consumers, who would like to know whether they can actually receive a quality service for which they are being charged.

Another ITU example, that of Bahrain, showed that actual speeds delivered on a 2Mbps service were always below 2Mbps, and just 1Mbps at peak times.

“It is technically very challenging to measure broadband speeds and quality accurately, but we are discussing the subject within the ITU expert group on telecommunications/ICT indicators (EGTI), with a view to finding additional metrics to refine the measurements,” it said.

The ITU said low speed fixed wire broadband subscriptions (256kbps to 2Mbps) made up less than 2% of total UK subscriptions. ITU doesn’t collect figures on subs below this speed because it does not consider sub-256kbps to be broadband. “This may explain why some rural internet subscriptions are not included in these figures,” it said.

If ITU used actual speeds experienced by consumers, especially on uploads, it might discover there are a lot fewer broadband subscribers too.

Comment

That millions are not getting the service they pay for should be a growing concern for regulators, politicians and civil servants who set targets, place contracts and pay broadband delivery bills. As many have said before, it is one thing to promise Britons a universal 2Mbps service; it is another to deliver it. To promise, to take the money and then not deliver, is fraud.

When so many regulators recruit their staff from the telcos there is a danger that they will over time become biased towards their former colleagues. The UK’s Financial Services Authority, which recruited most of its staff from among bankers, shows where this leads, and the cost to the country.

What countries need are tough-minded, independent and experienced communications regulators. But where to find them, and where do they get their training and experience? Perhaps, as with World Cup referees and umpires, the answer is to recruit the best from outside the country.

Orange in France said today it planned to extend the reach of its 10Gbps FTTO (Fibre to the Office) network to more than 70% of French businesses with at least 20 staff.

Source: ONS - Most UK businesses employ less than four people

Already a standard product in 3,500 communes, “Fiber for Business” will be available in 4,000 communes by the end of the year, Orange said. Connecting businesses to a fiber network gave them easier access to Orange’s “entire range” of network-based services, namely Business Ethernet, Business VPN and Business Internet.

Impressive, non?

Up to a point. There is a joke that suggests that French businesses are so dependent on the state that the language has no word for entrepreneur, which means there should be fewer small companies. Ignoring such cultural cliches, it seem reasonable to think that French companies largely mirror British ones, at least in the number of staff they employ.

If that is the case, then Orange’s fibre will be available to a less than massive 8.9% of all companies. Not quite the same impact as that headline-grabbing 70%, is it?

It would be wrong to let internet service providers charge content providers like Google, Netflix and iTunes for delivering content to customers, says Communications Chamber partner Rob Kenny.

In a point by point critique of a telco-commissioned AT Kearney paper, Kenny demolishes arguments telcos are using to persuade regulators and politicians to let them to charge content providers for delivery.

Source: R. Kenny - 10% of users cause 55% of net traffic.

In doing so, he strengthens the argument for other countries to follow the Dutch and pass laws that guarantee net neutrality, in other words, that telcos should not discriminate between different types of traffic, and continue to use their “best efforts” to get the bits to their destination as fast as possible.

Kenny’s most telling line is a quotation from Gary Bachula of Internet2, a US non-profit consortium of government and academic network researchers intent on building the next generation internet.

Bachula told the US Senate in 2006, that, based on seven years’ experience of running advanced broadband networks for five million users, “… we seriously explored various ‘quality of service’ schemes, including having our engineers convene a quality of service working group. As it developed, though, all of our research and practical experience supported the conclusion that it was far more cost-effective to simply provide more bandwidth.”

In addition, Kenny points out that the top 10% of internet users are responsible for 55% of the traffic. Why charge content providers when users generate the traffic, he says.

Kenny also shows that peer to peer traffic represents more than 30% of internet traffic. Charging content providers without addressing file-sharing between users would be “incomplete”, he says.

Besides, large content providers use massive server farms close to users to improve customer experience. This lowers the impact on the telcos’ core network, reducing their claim that content providers are free-riding and should therefore be liable for charges.

Kenny shows that the support the AT Kerney report offers telcos is deeply flawed, and thinly disguises their determination to stave off competition, keep their monopoly over access to end users, keep prices high and the market inefficient.

Unless governments and regulators ignore these special pleadings, incumbent telcos are unlikely to play a meaningful role in achieving the ambitions set out in Europe’s Digital Agenda and, closer to home, Digital Britain (revised).

BT must be broken up and Ofcom shaken out of its complacent tolerance of BT’s stalling tactics if the UK is to get the “best broadband network in Europe by 2015”, the country’s premier business association of communications users says.

The Communications Management Association (CMA) added “a toxic combination of regulatory timidity and the powerful self-interest of licence holders” is delaying the 4G spectrum auction, which would help to expand wireless access to high speed broadband.

Ofcom’s attitude deterred new investment in public communications networks because investors feared BT could “gazump” them without consequence, it added.

In a statement issued on Friday, the CMA, whose members buy some £13bn of communications services a year, said business users were increasingly critical of “the lack of a firm regulatory hand on the telecoms marketplace”.

It said BT was dictating the pace of high speed broadband roll-out in a way that benefited only BT shareholders. Ofcom let BT control services provided by competitors who rented BT facilities to deliver them, it said.

“The outcomes fall a long way short of policy priorities for UK economic growth, the needs of citizens and communities and the localism implicit in the Big Society agenda,” the CMA said.

PIA complacency

It accused Ofcom of complacency, both on the speed of BT’s broadband delivery and on allowing competitors access to BT’s physical infrastructure (PIA).

“There is little or no news from BT about a true point-to-point fibre programme or willingness to address the ‘dark fibre’ market that would offer anything like a future-proof architecture for the nation,” it said.

Europe’s Digital Agenda champion Neelie Kroes has told national regulators to insist that incumbent telcos such as BT, France Telecom and Deutsche Telekom offer an unlit or dark fibre product to competitors.

Bill Murphy, who is in charge of BT’s next generation broadband roll-out, has said BT will never offer dark fibre. It had once, but was burned when the dotcom crash meant many telcos had excess capacity and were forced into bankruptcy or to restructure, he said.

The CMA said PIA, which would give competitors’ access to BT’s poles and duct, was the most promising regulatory proposal since Ofcom imposed functional separation on BT. But Ofcom had allowed BT to slow down the process for years.

Ofcom had allowed BT to make a reference offer in January 2011. This was for £0.95/m for ducts, £21 per pole attachment, and competitors had to provide BT with reciprocal access to their networks.

BT’s competitors had rejected it, with some saying the prices were four to five times higher than BT’s costs.

Strangely passive

The CMA said Ofcom had allowed BT “to drag its feet for another year while it laboriously works on a further offer – presumably based on figures it already has at its fingertips.”

Even if the revised offer, expected this month, was rejected by competitors, Ofcom had only promised to “review” it, which could take another 18 months.

“Ofcom’s strange passivity is in contrast to the dynamic, hands-on approach taken by, for example, its Swedish counterpart, Swedish Post and Telecom Agency (PTS),” the CMA said.

The PTS had encouraged the Swedish Urban Networks Association (mainly municipal fibre network operators) to set up a fully automated dark fibre trading platform that national operators could buy from.

“The impact can be measured in enterprise growth, job creation and significantly reduced costs for businesses that are, in network revenue terms, more than made up through growth of the economy,” the CMA said.

Ofcom said it had obliged BT to allow other providers to get access to its infrastructure (ie ducts and poles) to deliver superfast broadband. “We expect BT to publish further information on prices for these products shortly,” an Ofcom spokesman said.

Hand-out to BT

The CMA also criticised the BDUK process for expanding access to high speed broadband mainly in rural areas, which could disburse £830m over the next five years. It seemed likely to give most of it to BT “to provide minimal broadband to the unserved areas of the country, and on BT’s terms”, it said.

“The current rules perversely penalise those areas which show initiative,” the CMA said. “The single biggest issue in attracting new private investors to the infrastructure market is a fear that, once planned, their investment will be subverted by aggressive BT tactical responses, even in areas where (BT has) previously shown no commitment to invest.”

Ofcom expected infrastructure access to support the government’s broadband delivery programme. This would extend “superfast broadband services” to consumers and businesses in areas where it was economically risky to invest, the spokesman said.

Split Openreach from BT

The CMA called for the government to follow the New Zealand example and impose full structural separation on BT and Openreach, which builds and operates BT’s physical infrastructure.

“While this would pose new regulatory challenges (and further interminable delaying arguments) the prospects facing business users could hardly be worse than they are now,” it said.

The Ofcom spokesperson said the undertakings Ofcom had accepted from BT in 2005 were in lieu of a reference to the Competition Commission. They led to functional separation and the creation of Openreach.

“We agreed to functional separation as we considered it the right way to address our competition concerns,” she said. “It has helped create one of the most competitive and dynamic broadband markets in the world with choice and cheaper prices leading to significant levels of consumer take-up.”

Regulatory timidity

The CMA said business users were irritated by the “creeping delays” to the 4G spectrum auction. “We see this as a toxic combination of regulatory timidity and the powerful self-interest of licence holders,” it said.

It said the UK was unlikely to get widespread 4G access until the middle of the decade, but it seemed Ofcom was not considering allowing roaming on 3G networks. Nor was it helping mobile network operators to rent dark fibre, as they did in Sweden, to speed up 4G roll-outs and reduce congestion in the airwaves.

“Ofcom must mandate access sharing as a licence obligation,” it said. “The regulator could thus eliminate once and for all the disease of ‘roaming’ from the mobile communications landscape, whilst reducing notspots, improving customer service and reducing required capital investment for operators collectively.”

Ofcom said it was “very keen” to see the 800MHz and 2.6GHz spectrum awarded as soon as possible, so that operators could roll out 4G mobile networks as soon as the frequencies became available in 2013.

“We hope that all stakeholders will accept the outcome of the discussions around this process without further challenge, and allow the UK’s citizens and consumers to enjoy the benefits of 4G services as soon as possible,” Ofcom’s spokesman said.

Despite claims that the UK has some of the cheapest broadband in the world, new research suggests that the UK is only 21st in terms of broadband affordability.

Sorce: Point Topic (Click to enlarge)

New data from market researcher Point Topic shows that broadband prices can be over a thousand times higher in terms of percentage of annual per capita income at purchasing power parity (ie comparing like for like) in poorer countries., Point Topic looked at more than 2,000 tariffs for the study.

Using the tariff for a year’s supply of the slowest available broadband service, the Swiss pay just 0.07% of their annual income for a year’s broadband, while Keyans can pay almost 80% of their annual income for theirs, said Point Topic CEO Oliver Johnson.

Britons, who pay 0.65% of their income for their most basic service, are 21st of the 64 countries studied.

Source: PointTopic (Click to enlarge)

“The analysis allows us to see how much of an average yearly income in each country would be needed to pay a year’s subscription for the cheapest option available. The results gap between rich and poor, the haves and have nots in broadband terms is revealing,” said Johnson.

Higher broadband penetration was in everyone’s interest, he said. “Governments gain revenue, businesses gain competitiveness and individuals get access to a wealth of benefits online.”

Johnson said mobile and satellite technologies offered access quickly and easily, but data caps and high overage costs meant take-up would be limited. Even the richest nations would have to subsidise 100% access, he said.

The nine companies long-listed as suppliers under the BDUK’s next generation broadband procurement framework process have had to sign non-disclosure agreements (NDA) that stop them from talking to firms that might become local sub-contractors .

One of the firms said the NDA did not allow it to discuss whether the NDA existed, who asked for it, and what reason it was given for having to sign it.. Others declined to comment or referred queries to the Department of Culture, Media & Sport, which did not respond to queries.

The long-listed firms are BT, Fujitsu Telecom, Network Rail, Capita, BeyondDSL, Parsons Brinkershoff (Balfour Beatty, ALU and Cable&Wireless Worldwide), Kcom, Thales and Geo. These are expected to be whittled down to six.

The companies will compete for hundreds of millions of pounds of taxpayers’ money that the government has set aside for extending high speed broadband to not-spots, particularly rural areas. DCMS has advertised for an accountant to watch the BDUK cash flow.

Local county councils and enterprise funds will be responsible for spending the money and ensuring that they get value for money. Culture minister Jeremy Hunt has said the people who control the purse strings should use the money to support local businesses as far as possible.

However, the NDA means that companies likely to win BDUK-funded contracts are unable to discuss their needs and invite solutions from local suppliers. As a result, unless firms break their gag, customers will have to wait longer for services, thus destroying Hunt’s target of the “the best broadband network in Europe by 2015”.

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